Over the past couple of decades, buyers and sellers have increasingly used credit cards to perform financial transactions regarding the sale of goods and services by telephone. Mail order transactions and television "home shopping" programs are but a couple of examples of this emerging and rapidly increasing trend. Such transactions provide significant advantages for both the buyer and the seller. The seller is able to reach national, and even international, markets without the need for establishing retail sales locations in diverse geographic locations. Moreover, because sellers can readily check the status and credit availability of a particular financial card at the time of the sale by established computer driven credit card verification systems, the seller is alleviated of the burden of trying to collect payments for bills. Buyers likewise benefit from such simplified financial transactions because buyers are able to purchase goods and acquire services without leaving their homes.
However, the prior art system of performing financial transactions described above has problems and significant limitations. A widespread problem involves credit card fraud. It is relatively easy to obtain credit card numbers from past transaction slips. Likewise, credit cards are frequently placed on counters at stores and the like, thereby making the credit card account number readily visible to other persons. A known method of fraud concerns illegal use of a credit card account number in a phone financial transaction by someone who has misappropriated the account number. In such transactions, the card is obviously not present during the transaction, and thus it is difficult, if not impossible, for the seller to verify that the caller has the credit card. The credit card companies have passed the burden of illegal telephone credit card transactions onto the seller by requiring the seller to pay the credit card company a "charge back" when a credit card holder refuses payment for a telephone transaction because the buyer alleges that the buyer did not purchase the item or service.
Another problem associated with the prior system is that numerous consumers do not have credit cards for a variety of reasons. Thus, these consumers are unable to take advantage of the ease of phone financial transactions. This problem is becoming more prevalent because many credit card companies are more selective in issuing cards during the present difficult economic times.
And still a further limitation of current phone financial transaction systems is the inability of the buyer to draw money directly against the buyer's checking or savings account, as opposed to purchasing against a credit card, when purchasing goods or services by telephone. There is currently no system for allowing consumers to purchase goods or services against their checking or savings account from their homes. The primary reason is that current banking laws require that a secret personal identification number (PIN) number be used to withdraw funds from the account holder's account from a remote location, such as is common in automatic teller machine (ATM) transactions. Such PIN numbers are not imprinted or magnetically coded on the financial card, but rather are memorized and/or written down by the financial card owner to provide increased security against unauthorized use of the financial card. Moreover, in transmitting such PIN numbers, federal banking laws require that the PIN numbers be transmitted in encrypted form to prevent theft or pirating during transmission. Thus, performance of such a transaction from a consumer's home would require an encryption method which ensures the secrecy of the PIN number during transmission across the communications network.
There is not a analogous law which requires that the account code printed on an ATM card or credit card be transmitted in encrypted form. Thus, at present, account codes on ATM type cards and on credit cards are transmitted in the clear, i.e., without being encrypted, thus providing an opportunity for unauthorized persons to obtain the number through known computer deciphering techniques. Such a procedure presents an invitation to misappropriate the account numbers during transmission across the communications network.